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Chapter 4
The Constitution as the
Foundation of the Legal
Environment
Copyright © 2008 by West Legal Studies in Business
A Division of Thomson Learning
The U.S. Constitution
and the Federal System
• The U.S. Constitution created the structure
of our national government and gave it
certain powers.
• It also placed limitations on those powers.
• It created a federal system with a tripartite
(3-part) division of government and a
bicameral (2-house) national legislature.
Copyright © 2008 by West Legal Studies in Business
A Division of Thomson Learning
2
Branches of Federal Government
JUDICIAL
BRANCH
Courts
EXECUTIVE
BRANCH
President
LEGISLATIVE BRANCH
Bicameral Congress
Senate
House of
Representatives
ADMINISTRATIVE
AGENCIES
(Created by the executive or legislative
branches to carry out a specific
function.)
Copyright © 2008 by West Legal Studies in Business
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3
U.S. Constitution and the States
• Constitutional Powers: powers
are possessed exclusively by the
federal government.
• Delegated Powers: given by states
to the national government.
Copyright © 2008 by West Legal Studies in Business
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4
U.S. Constitution and the States
• Shared Powers: delegated by
states to national but shared with
states.
• Federal Supremacy.
–Express federal regulation.
–“Silence of Congress”.
Copyright © 2008 by West Legal Studies in Business
A Division of Thomson Learning
5
Delegation ofand
Powers
U.S. Constitution
the States
We, the People
give power to…
The states, who
ratified the…
U.S. Constitution, which reserves some powers
for the States, delegates some powers to the
Federal government, and allows some powers
to be shared, or exercised by both.
Federal Government
Copyright © 2008 by West Legal Studies in Business
A Division of Thomson Learning
State Government
6
Interpreting and Amending
the Constitution
• Conflicting Theories:
– In the bedrock view, the purpose of a
constitution is to state certain set principles.
– In the living-document view, a constitution
states goals and is intended to change with
time.
• In recent years the use of the livingdocument interpretation has expanded the
powers of the federal government.
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Amending the U.S. Constitution
The Constitution has been amended, or changed, in three ways:
*Formal
Amendment Only 27 formal
amendments to the
Constitution have
been completed,
though thousands
have been
proposed.
Judicial
Interpretation –
The U.S. Supreme Court
has been called upon to
apply the Constitution to
many new situations,
unforeseen to the
document’s original writers.
By Practice –
In a few cases, the
actions of
government have
established accepted
practices which
depart from the
requirements of the
Constitution.
*Article V of the U.S. Constitution specifies the
procedure for adopting amendments.
Copyright © 2008 by West Legal Studies in Business
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Federal Powers
• Commerce Clause Powers.
– Became general welfare power (the
“affectation” doctrine).
– Commerce clause today.
– Commerce power limits power of
states.
• Financial Powers.
– Tax, borrow, spend, and coin money.
Copyright © 2008 by West Legal Studies in Business
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9
Constitutional Limitations
on
Government
on Government
• Among the limitations on
government that are most important
to business are the requirements of:
– Due Process.
• Substantive vs. Procedural.
– Equal Protection of the law.
• Reasonable Classification.
Copyright © 2008 by West Legal Studies in Business
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10
The Bill of Rights and Business
• First Ten Amendments provide protection
for individuals and corporations.
• Businesses enjoy free speech protections
under the First Amendment.
– Commercial Speech (advertising).
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A Division of Thomson Learning
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